Interest on refund under section 244(1A) once granted, cannot be withdrawn

Interest on refund under section 244(1A) once granted, cannot be withdrawn through rectification order under section 154. Since granting the interest on refund cannot be said to be a mistake apparent from record as it was arrived after due application of mind.

Shri A. Younuskunju, Younus Cashew Industries Versus The Deputy Commissioner of Income-tax – ITAT COCHIN

In this case the Assessing officer issued notice u/s. 154 of the I.T. Act purporting to rectify mistake in the proceedings on the plea that these were an omission to charge interest u/s. 220(2) of the I.T. Act which constituted a mistake apparent on the face of the record. Further, there is levy of interest u/s. 245D(6A) and withdrawal of interest on refund u/s. 244(1A) of the I.T. Act.

Regarding withdrawal of interest on refund already granted u/s. 244(1A), the CIT(A) observed that u/s 244(1A), interest is to be granted if the whole or in part of the refund referred to in sub-section (1) of sec. 244 is due to the assessee as a result of any amount having been paid by him after the 31st day of March, 1975 in pursuance of any order of assessment or penalty and such amount or any part thereof having been found in appeal or other proceedings under this Act be in excess of the amount with such assessee is liable to pay as tax or penalty as the case may be under the Act. To be entitled to interest u/s. 244(1A) of the I.T. Act, the assessee must be entitled to refund. However, in this case, the CIT(A) observed that assessee is not entitled to any refund. Further with respect to the order u/s. 154 of the I.T. Act, the assessee was required to pay additional demand with reference to the tax and interest calculated vis-à-vis the payment made by him as tax. Hence, the CIT(A) confirmed the disallowance of interest u/s. 244(1A) of the Act made by the Assessing officer. Against this, the assessee filled appeal before tribunal. Continue reading

Income Tax implications on conversion of Company into LLP

Income Tax implications on conversion of Company into LLP

The onset of Companies Act 2013 has ushered a paradigm shift in operation and management of companies. The benefits which, hitherto were available to Private Companies in the erstwhile Companies Act,  have to a large extent receded. While some call it an era of greater transparency, others (particularly small corporates) feel that the new law has hampered them from operating as a body corporate. As a substitute, people have started favoring LLPs as a medium for carrying on the businesses.

With much lower compliance burden and almost very little restrictions, coupled with status of a body corporate, LLP has become the new hot selling cake in the business world. The LLP Act contains enabling provisions pursuant to which a private company or unlisted public company (incorporated under Companies Act) would be able to convert themselves into LLPs. Provisions of clause 58 and Schedule II to Schedule IV to the Act provide procedure in this regard.  (More details can be found at

Income Tax treatment of a company converted into LLP is more or less tax neutral provided conditions specified in Section 47(xiiib) are satisfied. Continue reading

Windmill depreciation rate increase to 80% again.

Again wind energy devices & windmill depreciation rate for income tax purpose increase to 80%  and windmill developers will enjoy lower tax outgo while investing in windmills.

With effect from 1st April 2014, windmills developer can avail accelerated depreciation on windmills and wind energy special devices installed on or after 1st April, 2014 which allows the investing company to fast track the write-off of certain assets for tax purposes  The Income Tax department has amended the rules regarding this, through a notification 43/2014. Continue reading

Mere failure to deduct TDS is no longer offence u/s 276B.

If a person fail to deduct TDS, he is no longer liable to punish with rigorous imprisonment under section 276B of Income Tax Act, 1961.

Earlier the provision of Section 276-B of Income Tax Act, 1961 existed as under:-

“276B. Failure to deduct or pay tax.- If a person fails to deduct or after deducting, fails to pay the tax as required by or under the provisions of sub- section (9) of section 80E or Chapter XVIIB, he shall be punishable,- (i) in a case where the amount of tax which he has failed to deduct or pay exceeds one hundred thousand rupees, with rigorous imprisonment for a term which shall not be less than six months but which may extend to seven years and with fine; (ii) in any other case, with rigorous imprisonment for a term which shall not be less than three months but which may extend to three years and with fine.” Continue reading

Without serving notice, CIT (A) cannot enhance tax liability

Without serving notice offering reasonable opportunity to the assessee, CIT (A) cannot enhance tax liability or reduce tax refund and the order passed by CIT(A) takes serious illegality and it is contrary to Section 251(2).

In the case, Sri Y. Brahmiah (Died) Karimnagar Versus The Income Tax Officer -ANDHRA PRADESH HIGH COURT

The appellant is a trader in timber and apart from that, he has got other sources of income. He submitted returns for the three Assessment Years.The Assessing Officer accepted all the facts and figures furnished by the appellant. However, AO disallowed the claim for deduction of loss on the Saw Mill business. Instead, AO treated the income from the Saw Mill business as nil. Aggrieved by that and on other ancillary aspects, the appellant approached the Commissioner (Appeals). The Commissioner not only rejected the contention of the appellant but also in a way, reopened the assessment and directed the Assessing Officer to undertake an exercise. He has also indicated that the profit from sale of timber and cutting charges in the Saw Mill must be taken at 10% on the turnover. Continue reading